So a new Fitch report says real estate prices in Vancouver are overvalued by 26%.
They expect prices to drop about 15% in the next few years.
Somewhat suprisingly Tsur Sommerville agrees, prices are coming down and it all depends on interest rates:
“A lot depends on where interest rates go over the next few years,” explains Sommerville. “[If] interest rates three, four, five years from now are substantially higher than what they are now then housing prices will correct.”
Sommerville adds local home values could drop even more than the 15 per cent predicted by Fitch.
“If there was to be a correction, you might expect to see a bigger correction in house prices than in condos,” he explains.
So why would anyone buy now?
Well there’s this:
“One thing that I find striking, though is that [with] current interest rates prices, make some sense, when compared to rents,”
Some sense? Ok, sure, but what kind of sense? Good sense, common sense or non-sense?
I’m sure you can find your own examples, but a quick scan of craigslist will give you real easy rent / purchase comparisons.
Here’s one for the Hudson downtown, a two level loft.
A quick mortgage calculator says 5% down (You’re not using that $30k for anything else are you?) at 2.99% rate leaves you with a monthly payment of $2,829 without maintenance, strata, etc.
So some sense? Sure, but maybe not good sense.